2004 Instructions for Form 1040 (ALL) - Supreme Law Firm

Department of the Treasury
Internal Revenue Service
2004 Instructions for Schedule D
Capital Gains
form or schedule.
and Losses
Use Schedule D (Form 1040) to report the following.
• The sale or exchange of a capital asset (defined on this page) not reported on another
• Gains from involuntary conversions (other than from casualty or theft) of capital assets
not held for business or profit.
• Capital gain distributions not reported directly on Form 1040, line 13.
• Nonbusiness bad debts.
Additional information. See Pub. 544 and Pub. 550 for more details. For a comprehensive
filled-in example of Schedule D, see Pub. 550.
Section references are to the Internal Revenue Code unless otherwise noted.
4. Ordinary loss on the sale, exchange, (a) or (b), in a way (such as by gift) that
or worthlessness of small business invest- entitled you to the basis of the previous
General Instructions
ment company (section 1242) stock. owner.
What’s New 5. Ordinary loss on the sale, exchange, • U.S. Government publications, in-
Tax computation using maximum capital or worthlessness of small business (section cluding the Congressional Record, that you
gains rates. You will now use the Qualiby
purchase at the normal sales price, or
1244) stock. received from the government, other than
fied Dividends and Capital Gain Tax 6. Ordinary gain or loss on securities
Worksheet on page 34 of the Instructions held in connection with your trading busi- that you got from someone who had re-
for Form 1040 to figure your tax if you ness, if you previously made a ceived it in a similar way, if your basis is
have net capital gain or qualified dividends. mark-to-market election. See Traders in determined by reference to the previous
However, if you have any 25% rate gain Securities on page D-3.
owner’s basis.
(unrecaptured section 1250 gain) or 28%
• Certain commodities derivative finanrate
gain, you will still use the Schedule D Use Form 4684 to report involuntary cial instruments held by a dealer. See sec-
Tax Worksheet on page D-9 to figure your conversions of property due to casualty or tion 1221(a)(6).
tax. Part IV of Schedule D has been elimiinto
in the normal course of your trade or
theft.
• Certain hedging transactions entered
nated.
Use Form 6781 to report gains and
losses from section 1256 contracts and business. See section 1221(a)(7).
Capital Loss Carryover Worksheet. Use straddles.
• Supplies regularly used in your trade
the Capital Loss Carryover Worksheet on Use Form 8824 to report like-kind expage
D-6 to figure your capital loss carry- changes. A like-kind exchange occurs
or business.
over from 2003 to 2004. You will need a when you exchange business or investment Short Term or Long Term
copy of your 2003 Form 1040 and Sched- property for property of a like kind. Separate your capital gains and losses acule
D.
cording to how long you held or owned the
Capital Asset
property. The holding period for short-term
Gain on home acquired in a like-kind ex-
Most property you own and use for perchange.
If you sold or exchanged your sonal purposes, pleasure, or investment is a The holding period for long-term capital
capital gains and losses is 1 year or less.
main home that you acquired in a like-kind capital asset. For example, your house, furexchange,
you may not be able to exclude niture, car, stocks, and bonds are capital as-
figure the holding period, begin counting
gains and losses is more than 1 year. To
any of the gain. See Sale of Your Home on sets. A capital asset is any property held by on the day after you received the property
page D-2 for details.
you except the following.
and include the day you disposed of it.
• Stock in trade or other property in- If you disposed of property that you ac-
Other Forms You May Have cluded in inventory or held mainly for sale quired by inheritance, report the disposition
To File
to customers.
as a long-term gain or loss, regardless of
• Accounts or notes receivable for serv- how long you held the property.
Use Form 4797 to report the following.
ices performed in the ordinary course of A nonbusiness bad debt must be treated
1. The sale or exchange of: your trade or business or as an employee, or as a short-term capital loss. See Pub. 550
a. Property used in a trade or business; from the sale of stock in trade or other for what qualifies as a nonbusiness bad
property held mainly for sale to customers.
b. Depreciable and amortizable propdebt
and how to enter it on Schedule D.
erty;
• Depreciable property used in your
trade or business, even if it is fully deprecic.
Oil, gas, geothermal, or other mineral ated. These distributions are paid by a mutual
Capital Gain Distributions
property; and
• Real estate used in your trade or busid.
Section 126 property. ness.
pany) or real estate investment trust from
fund (or other regulated investment com-
2. The involuntary conversion (other • Copyrights, literary, musical, or artistributions
of net realized short-term capital
its net realized long-term capital gains. Disthan
from casualty or theft) of property tic compositions, letters or memoranda, or
used in a trade or business and capital as- similar property: (a) created by your perstead,
they are included on Form 1099-DIV
gains are not treated as capital gains. In-
sets held for business or profit.
sonal efforts; (b) prepared or produced for
3. The disposition of noncapital assets you (in the case of letters, memoranda, or as ordinary dividends.
other than inventory or property held pri- similar property); or (c) that you received Enter on line 13 the total capital gain
marily for sale to customers in the ordinary from someone who created them or for distributions paid to you during the year,
course of your trade or business. whom they were created, as mentioned in regardless of how long you held your in-
D-1
Cat. No. 24331I